Fixing Social Security

Posted: Thursday, May 03, 2001

By Editorial

The following editorial appeared in today's Washington Post:

President Bush this week appointed a commission to recommend ways to put Social Security on a sound financial footing, even as he celebrated a tax-cut agreement with Congress that will compound the difficulty of the commission's task. The outlines of the Social Security problem are familiar. When the baby boomers retire, there won't be enough workers to support them at current tax and benefit rates. To keep the system solvent, it's estimated that benefits will have to be cut by about a fourth, or revenues increased by about a third, or some combination of the two.

Mr. Bush has made clear he opposes an increase in the Social Security payroll tax. The tax-cut agreement he celebrates will meanwhile use up the bulk of the projected surplus in the years ahead in other than Social Security funds. Its effect will be to strip the government of resources - general revenues - that might be used to bolster Social Security. Unless the commission proposes tax or other revenue increases for which neither the president, the majority in Congress nor most of the commission's own members have shown an appetite in the past, that leaves benefit cuts.

The president has endorsed a partial privatization of Social Security. He would let younger workers begin to use a share of their Social Security taxes to set up personal savings and investment accounts. Most of the commissioners he chose have a record of sympathizing with such an approach. The idea is, in part, that the return on the accounts would be greater than the return on Social Security taxes. But by letting people divert a share of their taxes to set up such accounts, the proposal would also reduce the money available to pay the currently guaranteed benefits, for which there already are insufficient funds. It makes the problem worse before it makes it better.

Private accounts have much to recommend them, both to stimulate savings ahead of the boomers' retirement and to give people some control over their finances. But the right way to create them is atop Social Security, without a diversion of Social Security funds. Some of the money going to the president's tax cut could in theory be used for such a purpose. Social Security benefits would then be less at risk.

In discussing his proposal in last year's campaign, and again this week, Mr. Bush left out any mention of benefit cuts. But the commission will scarcely be able to do so. In the long run, there has to be a balancing of Social Security's revenue and costs. Achieving the balance requires tough choices. The public has to be convinced that the choices were fairly made and the pain kept to a minimum. Mr. Bush's spokesman said he chose a commission of relatively like-minded members to avoid the rifts and indecision that have plagued other advisory commissions. That's fair enough. But to be effective, the commission needs to be able at the end to make a case that it has considered the full range of possible solutions to the Social Security problem.